An integrated approach to constructing the use table of ...



An integrated approach to construct the use table of imported goods and the use side trade margins table

Bart van den Cruyce[1], Federaal Planbureau, July 2002, FIRST DRAFT

Abstract

This paper describes the compilation of the use table of imports of goods and the use side trade margins table for the Belgian economy in 1995. These are important steps in the conversion of the supply and use table to the symmetric total and domestic input-output table. Original in this approach is that the use table of imports and that of trade margins are computed simultaneously relying heavily on detailed data on imports and exports of goods.

Introduction

Both the compilation of the use table of imports and that of the use side trade margins table are necessary steps in the conversion of the supply and use table in an input-output table for total and domestic output.

A use table of imports gives for each imported product (forming one row of the table) its use for intermediate consumption in each branch (forming a column), as well as its use for final consumption, gross capital formation and exports (also expressed in columns). By deducting the use table of imports from the total use table, one obtains the use table for domestic output. The use table of imports contains both goods and services. We will only deal with the destination of imported goods[2] here.

The use side trade margins table has the same form as the use table. For each good, it gives the trade margins paid by its purchasers. A trade margin is defined as the difference between the price realised on a good purchased for resale and the price paid by the trader to replace it at the time it is sold[3]. There are trade margins on most goods[4], not on services.

The importance of imports and trade margins is illustrated by their weight in the supply and use of goods in Belgium. In 1995, imports were 42% of the total supply of goods. The trade margins amounted to 13% of the total use of goods. In spite of the huge sums often involved, the compilation of both use side tables is typically fraught with problems of data availability while most IO-compilation textbooks offer only little guidance, usually only in the form of suggesting plausible assumptions.

At the start of the compilation of the use table of imports and the use side trade margins table we dispose of a supply table valued at basic prices and a use table valued at purchaser prices[5]. As prescribed by the European System of Accounts 1995 (ESA 95), the supply table also contains a transformation into purchaser prices. Thus there is a column for transport margins, one for trade margins, one for import duties and taxes, and some for other product taxes and subsidies. This describes the problem to be solved. In addition, the ESA 95 requires a distinction between retail and wholesale trade margins that was not made yet in the supply table.

To solve this problem, we dispose of a database with the import and export flows of goods at the level of the Combined Nomenclature (CN), which is the most detailed product classification in statistics[6]. The data correspond to the intra/extrastat database available in EU countries. In addition to the product, the database from the Belgian National Bank allows us to identify the importing or exporting industry[7] and to make a distinction between intra- and extrastat trade flows as well as to distinguish the type of transaction (sale, goods in transit, returned goods, subcontracting…).

It is straightforward to use detailed international trade statistics to help making the use table of imports. We will demonstrate that, especially in a small open economy, these statistics are just as useful for a data based compilation of the use table of trade margins. At the same time we show the advantages of a really integrated compilation of the goods part of the use table of imports and the use side trade margins table.

The basic idea behind this integrated approach is that no trade margins exist on goods that are imported directly by firms that use these goods for their own intermediate consumption or investment. Equivalently, there are no trade margins on direct exports by producers. We estimated that in 1995 more than 34% of the imported goods in Belgium were imported directly by firms for their own intermediate consumption. Up to 61% of the exports were direct exports by producers. To make use of this information we introduced a distinction between the supply and demand of a product on the total and the internal (or national) market.

A second advantage of our approach is that it allows to identify which part of imports are used for exports in the context of goods in transit, returned goods, merchanting and other important special cases which should be excluded from imports or exports according tot the ESA-rules but are not always directly observed.

The integrated approach based on detailed trade data offers various other possibilities, like deriving the use table of import duties and taxes, making a geographical breakdown in intra-EU and extra EU imports and improving the breakdown of wholesale and retail margins. Some of these have already been put into practice and will be commented on.

In part 2, we discuss the methodology and results of the compilation of the use table of imports of goods. In part 3, the same is done for the use side table of trade margins.

The Compilation of the use table of imported goods

1 Literature

Ideally, to compile the use table of imports one should dispose of the results of an import destination survey. While available in some countries[8], most countries, like Belgium do not have such survey data.

Confronted with this reality, the 1995 European System of Accounts (par 9.49) writes:

“The use table for imported products should be compiled by exploiting all information available on the uses of imports, e.g. for some products the major importing enterprises may be known and for some producers information on the amount of imports may exist. However, in general, direct statistical information on the use of imports is scarce. This information has therefore usually to be supplemented by assumptions by product group”

The suggestion above that (combined) information on imports by product and industry would usually not be available is too pessimistic. In Belgium, such information is available, and in view of their extrastat and intrastat obligations, the construction of similar databases must be feasible in most EU countries.

The problems are not limited though to the availability of trade data by industry. The (draft version of) the Eurostat Input-Output Manual (2001)[9] sums up the problems if one works with a database yielding combined information on import of products by industry. We mention three of them:

• Goods imported by a manufacturing enterprise can be used for intermediate consumption or for capital formation. It is not always possible to distinguish intermediate and capital goods on the basis of the character of the good.

• A lot of products are imported by traders who are not their final users.

• The great product detail available in import statistics cannot be exploited fully because the product detail is usually much smaller in the supply and use table.

These problems matter in the Belgian context. However, they are no excuse for not using detailed import and export data. As for the difference between capital formation and intermediate consumption, we disposed of a table of investments by SUT-product and branch. Within a given cell of the use table the allocation of imports between investments and intermediate consumption was done proportionally.

The fraction of imports realised by wholesalers and retailers bears more interest in an approach where the trade margins table is compiled simultaneously. The manual also seems to ignore the usefulness of export data for both the compilation of the use table of imports as that of the use side trade margins table.

The Eurostat IO manual rightly states that the low level of product detail in the use table[10] makes it theoretically unattractive to allocate imports proportionally to all users. A proportional allocation of imports implies that imported products are fully homogeneous to domestically produced products. This is not true at a level of 231 goods, and not even at the level of the combined nomenclature classification. A further increase in the number of products in the use table would reduce this problem, but would worsen another one. A more detailed use table contains more errors.

This is likely because the compilation of the use table is based on a survey of a limited sample of firms. In that case, comparing it with imports at the more detailed product level may lead to underestimating the use of imports for intermediate consumption, as intermediate consumption itself is wrongly distributed over products. Because such errors were already present at the level of the 231 goods in the use table, we had to design a procedure to prevent them from affecting the use table of imports at a more aggregated level.

2 Data and general approach

Our data are based on the import and export statistics that all Belgian firms performing such transactions have to supply to the Belgian National Bank[11] (BNB) in the context of Belgians intrastat and extrastat obligations. The database yields:

• the (5 digits) nace-bel activity code of the importing/exporting industry or trader

• the product according to the combined nomenclature (at 8 digits) with a conversion to the products in the supply and use table

• the type of transaction involved (sale, returned goods, subcontracting…)

• the distinction between imports and exports in and outside the European Union

Crucial for the quality of the data is that the four dimensions can be combined.

The allocation of imported goods to the use table or their “destination” is done in three steps. First it is examined which imports can be directly allocated to exports. Next, we determine the part of imports directly used for intermediate consumption or investments by the importing industry. The third step allocates the import of traded goods. Practically all goods destined for consumption make part of this group.

As already indicated, the allocation of imported goods and trade margins on those (as well as other) goods are integrated. This implies that we will already briefly comment on the allocation of trade margins in some steps. More general issues related to trade margins are discussed in part 3.

The calculus was done using SAS-programs. These allow sufficient flexibility to mix general mathematical and accounting operations with interventions for specific products or branches when needed. We describe the steps in the next 3 sections, and discuss the results in section 2.6.

3 The imported goods destined for export

Below, we discuss the various cases in which imports were directly allocated to exports in their order of implementation.

1 Goods in transit and some other special transactions

Goods in transit through Belgium cross the national borders but are not bought or sold to a Belgian party or linked in another way with the intermediate use, investment or production in Belgium. Therefore the ESA 95 stipulates that they should be excluded from imports and exports.

However, import and export statistics of goods do often comprise such flows, as they also cross the national borders. In EU countries, this is the case for goods in transit coming from or going to non EU countries. Happily, the BNB was able to isolate these transit flows, such that they could be deducted from imports and exports before making the supply and use table.

Besides goods in transit, there are some other cases where the type of transaction[12] of a goods-flow indicates a close link between imports and exports. Some goods only leave or enter the country temporarily because they are sent abroad for exhibitions or for small repairs. The ESA says that such goods that leave the country temporarily, being generally returned within a year in their original state and without change of ownership should be excluded from imports and exports. Goods that enter the country temporarily to be exported within the same year are obviously imports destined for exports. Neglecting this distinction, both flows of goods are still included in the imports and exports figures in the supply and use table.

In our trade data they can be identified through their transaction type. Therefore, if a good is imported and exported by the same branch, and the transaction type is one of goods to be returned or returned goods, the imports are allocated to exports (as far as export values allow). In 1995 56.5 billion BEF (=1.4 billion Euro) of imports were destined for exports in the context of these transaction types.

2 Merchanting

The ESA-rules also stipulate that no import or export is recorded when merchants or commodity dealers buy from non-residents and then sell again to non-residents within the same accounting period. It does not matter whether the merchant (or international trader) is a resident or a non-resident. In the case he is a resident, the difference between the selling price and the purchase price is not to be considered as a trade margin, but as an exported trade service.

However, in contrast to goods in transit and the other special transactions discussed above goods purchased by Belgian traders to resell them abroad cannot be distinguished directly from other imports or exports in the trade data. In both cases the transaction type is a normal purchase.

In a country like Belgium, which often serves as a distribution centre for the European market, not being able to separate this part of imports from the imports destined for the national economy is hazardous, both for analysis and international comparisons. Yet it does not necessarily affect the equilibrium of the supply and use table for a given product. This is probably the reason why the BNB opted not to try to exclude good flows that are the result of merchanting.

Since exports enter in the use table and are valued in purchaser prices, while imports enter in the supply table and are valued in basic prices, this choice does imply that there are also (exported) trade margins realised on those goods[13]. It obviously is another reason for imported goods to be destined for exports. Thus, if one might neglect this issue when compiling the supply and use tables, this certainly is not the case when constructing the use table of imports (and that of trade margins).

To address the problem of estimating merchanting by residents, we made full use of the detail provided in the trade data.

We start by estimating a maximum value for merchanting done by all (importing) industries and for all goods. In equation (1) we say that:

(1)

Here MERCHpq is the value of merchanting of SUT-product p by SUT-branch q. Recall that SUT refers to the Supply and Use Table, which comprises 231 goods and 135 branches. To the right of the equality sign mij and xij are the import and export value of good i in industry j. Goods are defined here at the level of the 8 digits combined nomenclature, while industries at the level of the 5 digit nace-bel industries.

Equation (1) is likely to yield a maximum value for merchanting, because merchanting implies that exactly the same good that is imported is also exported during the same year. The formula adds the condition that imports and exports are realised by the same industry. This is done to ensure that imports are not mistakenly allocated to exports of similar goods that are produced and exported by other firms. The latter is more likely if the importing and exporting industry are not the same.

The industry condition excludes cases of merchanting where more that one Belgian trader intervenes. In some cases this is too restrictive. Still, generally the estimate in (1) is to be considered as a maximum value. We therefore only acccepted a trade flow as merchanting in cases where, within a given SUT-branch and product, there was both too much imports as compared to intermediate consumption and too much exports as compared to production. Merchanting occurs in both trade and non-trade branches, but is relatively more important in wholesale branches.

The equation used in the program was somewhat more complex than equation (1), because the latter neglects the valuation problem. Since exports are valued in purchaser prices, they include trade margins (and possibly transport margins taxes and subsidies). There are no retail margins on merchanting. We used 2/3 of the quotient MG/TS2 as a proxy for the (wholesale) trade margins rate on merchanting (with MG the trade margins and TS2 the total supply in purchaser prices for each product). The trade margin rate on merchanting was further limited to a maximum of 20% for wholesalers and 10% for other branches.

3 Imports of capital goods destined for exports because of disinvestment

The gross fixed capital formation in the use table consists of both positive and negative values. Positive values include new or existing fixed assets purchased. Negative values include existing fixed assets sold. If fixed assets are sold between residents, this has no effect on the total investment of a country.

If fixed assets are bought from non-residents, investments and imports increase. Similarly, if they are sold to a non-resident, investments decrease while exports increase. If both occur simultaneously, and the amounts are large, a situation may arise in which the value of imports exceeds that of investments in a given branch and for a given investment good. In that case, there is no obvious destination for the imported investment goods.

Therefore, we opted to allocate imported capital goods (that were not already linked to exports through merchanting) to exports in the case imports of investment goods exceeded investment and intermediate consumption[14] in the importing branch. An important additional condition was the existence of an export surplus with respect to production of the same capital good in the same branch.

4 The imports destined for intermediate consumption, investment and inventory changes of materials and supplies

A crucial distinction was made between the imports of a trade and a non-trade branch. Trade branches are the sale, maintenance and repair of motor vehicles and retail sale of automotive fuel (both in nace division 50), wholesale (nace 51) and retail trade (nace 52). Imports by trade branches are primarily traded goods, while imports by non-trade branches are most likely to be directly destined for intermediate consumption or investment.

Yet, there is also an important trade activity by non-trade branches. This trade activity is called secondary trade. To distinguish it from other uses of imported products, we compare imports directly with intermediate use and investments for each combination of SUT-product and branch. To be able to compare imports with intermediate consumption and investment they have to be valued in the same prices. Given our starting point, we don’t have a table of taxes and subsidies and trade and transport margins that could be used to put the use table in basic prices.

But we know one important thing: there are no trade margins on direct imports for own intermediate consumption and investment. Because there could be transport margins, and some specific taxes (i.e.: import duties, registration rights and excise taxes) on these imported products we convert imports in purchaser prices by augmenting them with a proportional share of these transport margins and taxes[15].

After having converted imports in purchaser prices, the basic rule is simple. If the imports of a given SUT-product in a given SUT-branch are lower than the sum of its intermediate consumption and investment of this product, they are allocated fully to these destinations. The allocation between both is proportional.

If the imports in purchaser prices are higher than the sum of intermediate consumption and investment, two options are open. It is possible that they are destined for intermediate use, but cannot be placed there because the use of that product was underestimated[16] or because the imported products will only be used the following year. It is also possible that the imported goods are destined for resale. For example, a multinational firm with plants in Belgium is likely to offer imported goods that are close to those produced in Belgium to increase its product mix.

Thus, an excess of imports over intermediate consumption and investment for a given product in a given branch can be due to an underestimation of the use, an inventory increase of raw materials or the existence of a secondary trade activity. To distinguish between these three possibilities, we also compare imports with uses at a more aggregated product level.

Recall that the SUT-table we dispose of is rectangular. It holds more products than branches, particularly with respect to goods. For 231 goods, there are only 73 goods producing branches[17]. For our additional comparison we compare imports with uses at the level of the 73 goods that correspond to the goods producing branches. The idea behind it is that the errors in the estimation of intermediate use and investment by product are likely to be smaller at a more aggregate product level.

A typical error is one where the use table omits materials and supplies with a small but positive intermediate consumption in a given industry[18]. The large number of cases where a relatively small imported value met a zero value of intermediate consumption is an indication of the presence of such errors. If untreated, the sum of all these errors leads to a downward bias of the estimate of the part of imports used for intermediate consumption. A similar story holds for investment.

Thus, besides comparing the imports with the uses of an industry at the level of 231 goods, we also compare them at the level of 73 goods. It is only if imports (in purchaser prices) exceed intermediate consumption and investment at the level of the 73 goods, that the imports of that particular industry are not destined fully for its intermediate consumption or investment.

Contrary to what one may believe, implementing this rule does not make it impossible to compile a use table of imports at the level of the 231 goods. To do this, we use the inventory changes of materials and supplies as an equilibrating tool. Table 1 below illustrates how this was done. It shows the imports and intermediate consumption of CPA product 20 (wood an products of wood;…) of SUT-branch 31A1. That branch combines the electrical machinery and apparatus industries 31.1, 31.2 and 31.3.

Table 1: Computing the use table of imports in the case of errors in the use table (numbers in millions of BEF)

| |CPA-Product |Interm. |Imports |Imports for |Imports for |

| |code |Consumption | |inven-tory |int. cons. |

| | | | |in-crease | |

|Wood, sawn, planed or impregnated |20.1 |0 |1.8 |1.8 |0 |

|Veneer sheets, plywood, laminboard, particle board,|20.2 |0 |16.2 |16.2 |0 |

|fibre board and other panel and boards | | | | | |

|Builders’ joinery and carpentry, of wood |20.3 |0 |0.1 |0.1 |0 |

|Wooden containers |20.4 |359 |76.2 |-19.3 |95.5 |

|Other products of wood; articles of cork, straw and|20.5 |0 |1.2 |1.2 |0 |

|plaiting materials | | | | | |

| | | | | | |

|Wood and products of wood and cork, articles of |20 |359 |95.5 |0 |95.5 |

|straw and plaiting materials | | | | | |

Columns 3 and 4 of table 1 show that while there are imports of all wood products there is only one (wooden containers: CPA product 20.4) with a positive intermediate consumption. In the light of possible errors in the use table, it is not surprising that this is the CPA product with the largest import value.

If one compares the total imports of product 20 (95.5 million BEF) with its total intermediate consumption in branch 31A1 (359 million BEF), there is no problem. Since we suspect the use of the other products to be underestimated[19], we do not treat their imports as traded goods, but allocate them to an inventory increase of materials and supplies. To make sure that the import share of intermediate consumption is estimated correctly at the higher product level, we increase the import used for intermediate consumption of CPA-product 20.4 by the excess imports of the other products. To compensate this in the row of product 20.4, we allocate a negative contribution of the same amount to the change in inventories of materials and supplies in the use of imports table.

This approach has the benefit of keeping the advantageous of working at the detailed product level, without making errors at the more aggregate level of 73 goods. It is the latter product level that matters for the computation of the input output matrix, since the use matrix must be square before it can be turned into an input output matrix.

A drawback is that at the detailed product level, the use table of imports may contain products where the imports appear to have a negative impact on inventory changes of materials, which is counterintuitive. Yet at the higher product level these negatives disappear completely. Moreover, the negative contributions of some branches to inventory changes may be undone by positive one’s in others even at the detailed product level.

The solution illustrated in table 1 is only applied if the imports valued in purchaser prices do not exceed the sum of the intermediate use and investment for a given branch at the level of the 73 goods. In the other case, the excess imports are either treated as traded goods or as uncompensated increases in inventories.

If the imported goods with excess imports are similar to the output of the branch, they are treated as imports destined for resale. If not, the imports are allocated to increases in the inventories of materials and supplies. These increases in supplies are not compensated by decreases in other products. A product is declared to be similar to the output of a branch if there is a positive output in the supply table at the aggregated product level (the 73 goods). The reason for applying this rule is that if a producing unit engages in a trade activity, we believe that it is more likely to do so in products that are close to its own output. Obviously, the imports that are traded still have to be allocated to a part of the use table. How this is done is explained in the next part.

5 The allocation of imports destined for resale

Even for the destination of traded imports, the international trade data provide useful information. They enable us to determine the supply and demand on the (Belgian) internal market and are used to distinguish the imports of consumption goods.

1 Supply and demand on the (Belgian) internal market

So far we have been able to allocate a part of imports directly to intermediate consumption and investment of the importing non-trade industries. We also allocated some imports directly to exports in the context of merchanting and special types of international goods flows.

Table 2 below summarises the results obtained so far. We were able to link 34.3% of the value of the imported goods directly to the own intermediate use of the importing industry, while 3% was linked with the own investment. A very large share of imports was allocated to exports, both in the context of merchanting (19%) and the other forms of re-export discussed earlier (2.7%). 2.2% was allocated to inventory changes in the importing industry.

Table 2: The directly allocated imports and those offered on the (Belgian) internal market1

| |Imports |Share of imports directly allocated to: |% of imports |

| | | |offered on |

| | | |internal |

| |(Million | |market |

| |euro) | | |

| | | |(%) |

| |=100% | | |

| | |Merch-anti|Other |Own inter-|Own |Inven-tory| |

| | |ng |reex-ports|Medi-ary |in-vest|chan-ges | |

| | | | |cons. |-ment | | |

| | | | |(%) | |(%) | |

| | | |(%) | |(%) | | |

| | |(%) | | | | | |

|Products of agriculture, hunting and forestry |4008 |19.6 |0.2 |46.2 |1.4 |1.5 |31.2 |

|Fish and other fishing products |211 |8.9 |0.2 |26.7 |0.0 |1.0 |63.2 |

|Coal and lignite; peat; crude petroleum and natural |2958 |1.8 |0.2 |43.5 |0.0 |0.6 |53.8 |

|gas; uranium and thorium | | | | | | | |

|Metal ores and other mining and quarrying products |5886 |10.0 |1.2 |14.2 |0.0 |0.8 |73.8 |

|Food products, beverages and tobacco |8825 |19.5 |0.6 |26.9 |0.0 |2.4 |50.6 |

|Textiles and textile products |5575 |16.6 |1.3 |33.7 |0.0 |3.0 |45.5 |

|Leather and leather products |983 |14.2 |0.7 |16.5 |0.0 |4.7 |63.8 |

|Wood and products of wood and cork |1078 |18.1 |0.4 |36.4 |0.0 |3.0 |42.0 |

|Pulp, paper and paper products; recorded media; |4000 |17.2 |0.9 |42.7 |0.0 |2.3 |36.9 |

|printing services | | | | | | | |

|Coke, refined petroleum products and nuclear fuel |2975 |33.6 |1.1 |26.1 |0.0 |3.0 |36.1 |

|Chemicals, chemical products and man-made fibres |16022 |24.8 |1.7 |47.4 |0.0 |2.6 |23.5 |

|Rubber and plastic products |3655 |13.2 |0.9 |38.6 |0.0 |4.7 |42.5 |

|Other non metallic mineral products |1755 |21.7 |0.4 |34.6 |0.0 |8.6 |34.7 |

|Basic metals and fabricated metal products |10208 |11.0 |0.6 |57.2 |2.0 |3.7 |25.5 |

|Machinery and equipment n.e.c. |7391 |21.4 |6.8 |16.3 |20.5 |1.2 |33.8 |

|Electrical and optical equipment |10176 |24.4 |7.3 |22.0 |8.3 |2.1 |35.9 |

|Transport equipment |16648 |19.8 |5.8 |38.9 |2.9 |0.9 |31.7 |

|Other manufactured goods n.e.c. |5209 |23.9 |1.2 |10.8 |2.6 |2.1 |59.4 |

|Electrical energy, gas, steam and hot water |1095 |0.0 |0.0 |1.7 |0.0 |0.1 |98.2 |

|TOTAL |108656 |19.0 |2.7 |34.3 |3.0 |2.2 |38.7 |

1 Imports are expressed in basic prices

All imports that have already been allocated add up to 66554 million Euro, which is 61.3% of the total import value. All these import flows have one feature in common. They are not traded at the Belgian internal market. The Belgian internal market includes all goods and services that were traded (at least once) between two Belgian residents. If only one of the parties is a resident, the good makes part of total demand and supply, but not of demand and supply on the internal market.

Once a good has been traded between two Belgian residents, our trade data do not enable us to determine its destination directly, which is why the share of still unallocated imports, given in the last column of table 2, equals the share of imports offered on the Belgian internal market. In total 42.1 billion Euro or 38.7% of imports of goods was offered on the internal market.

The table shows that the fraction of imports that is offered on the Belgian internal market differs greatly between product groups. With resp. 23.5% and 25.5 % it is lowest for Chemicals, chemical products and manmade fibres and Basic metals and fabricated metal products. This reflects the high share of imports of these goods that could directly be allocated to intermediate consumption.

Besides imports, the supply on the internal market also contains a part of domestic production. Since they do not involve a transaction between two Belgian residents, direct exports of own production and production of own investments[20] are excluded from the supply and demand on the internal market.

To determine the part of production that is directly exported, we compare the production, given in the supply table, with the export figures in our international trade data. This is done at the (combined) level of the 231 SUT-goods and 135 SUT-branches. As production is valued in basic prices and exports in purchasing prices, this requires a conversion of exports into basic prices. However, like for imports used for own intermediate consumption, there are no trade margins on direct exports by producers. Exports are also excluded from certain taxes, like excise taxes and registration rights. This reduces the potential valuation difference between production and exports greatly and enables a reliable comparison.

The result of this exercise is illustrated in table 3, which gives the derivation of the share of production offered on the Belgian internal market. All figures are valued in basic prices. In total 71.8 billion Euro or 47.3% of production of goods is exported directly. The remaining 52.7% of production is offered on the internal market. Like in the case of imports, there are large differences depending on the type of goods. In accordance with the strong international focus of the corresponding sectors, the share of direct exports is clearly higher than average for textiles (62.6%), chemicals (66.2%) and transport equipment (79.7%).

However, the significance of determining the direct exports of own production for compiling the use table of imports lies not on the supply, but on the demand side. It implies that a large share of exports can be excluded as a destination for imports, since they are already linked with production. When valued in purchaser prices the direct exports of production amount to 73.7 billion Euro. This is no less than 61% of the export value of goods (of 120.8 billion Euro).

Table 3: The share of production offered on the Belgian internal market

| |Production |Direct exports |Share of |Share of |

| |(basic prices) |of own |production |production |

| | |production |directly |offered on |

| | |(basic prices) |exported |internal market |

| | | | | |

| | |(Million euro) | | |

| |(Million euro) | | | |

| | | | |(%) |

| | | |(%) | |

|Products of agriculture, hunting and forestry |7079 |323 |4.6 |95.4 |

|Fish and other fishing products |105 |17 |16.5 |83.5 |

|Coal and lignite; peat; crude petroleum and natural gas; |0 |0 | | |

|uranium and thorium | | | | |

|Metal ores and other mining and quarrying products |996 |477 |47.9 |52.1 |

|Food products, beverages and tobacco |23247 |7545 |32.5 |67.5 |

|Textiles and textile products |7852 |4913 |62.6 |37.4 |

|Leather and leather products |345 |203 |58.9 |41.1 |

|Wood and products of wood and cork |2158 |661 |30.6 |69.4 |

|Pulp, paper and paper products; recorded media; printing |9086 |1876 |20.6 |79.4 |

|services | | | | |

|Coke, refined petroleum products and nuclear fuel |5163 |1332 |25.8 |74.2 |

|Chemicals, chemical products and man-made fibres |21081 |13958 |66.2 |33.8 |

|Rubber and plastic products |5032 |2851 |56.7 |43.3 |

|Other non metallic mineral products |5559 |1936 |34.8 |65.2 |

|Basic metals and fabricated metal products |18905 |10905 |57.7 |42.3 |

|Machinery and equipment n.e.c. |8224 |4502 |54.7 |45.3 |

|Electrical and optical equipment |7774 |4752 |61.1 |38.9 |

|Transport equipment |17458 |13921 |79.7 |20.3 |

|Other manufactured goods n.e.c. |4076 |1523 |37.4 |62.6 |

|Electrical energy, gas, steam and hot water |7693 |113 |1.5 |98.5 |

|TOTAL |151831 |71809 |47.3 |52.7 |

Before giving numbers of the demand side of the internal market, we explain how we used trade data to directly allocate a part of imports to consumption.

2 The import of consumption goods by trade branches

As almost all imported goods that are destined for consumption pass through wholesale and/or retail trade, imports used for consumption make part of the internal market. Yet it is possible to allocate some of these imports directly to consumption.

With imports known up to the level of the Combined Nomenclature (CN) at 8 digits, some imported goods can be identified as intermediate goods, investment goods or consumption goods. Still, even at that detail, goods can have multiple uses. An example of these are refined petroleum products like gasoline and gas oils, which can be used both for intermediate consumption and consumption[21]. A similar problem exists for many investment goods, which often appear as well in the intermediate use. The list of products in the combined nomenclature changes annually, which makes it difficult to make a stable classification of goods destined for intermediate use, consumption and capital goods although such attempts do exist.

Given the existence of goods with multiple uses we chose not to work with a list of exclusive consumption goods, but to set out rules that say which imported CN-goods are mainly consumption goods.

For realising this, we use the information about the activity of the importers of a good. A CN-good is said to be mainly a consumption good if it corresponds to a SUT-product with a positive consumption, and the import share of retail traders is at least 5% of the total imports at the level of the combined nomenclature (CN). 5 % is also the share of retail trade in the total import value. This includes retail trade except motor vehicles and motorcycles (nace 52), retail trade services of motor vehicles (nace-bel 50.103), retail trade services of parts and accessories of motor vehicles (nace-bel 50.302) and retail trade services of motor fuel (nace 50.5).

When applying this rule, 29% of the imported CN products were consumption goods. The rule to determine which CN-product is mainly destined for consumption could possibly be improved[22]. With a minimum import share of retail trade of 10%, still 23% of the imported CN–goods would have been consumption goods.

We also continue to take account of the importers industry. Imports by non-trade branches were never directly destined for consumption. Their treatment is explained in the previous sections. On the other hand, all imports by retailers were destined for consumption (unless if impossible given the value of consumption).

Applying the rules outlined above, all CN (mainly-)consumption goods imported by the wholesalers of food, beverages and tobacco (nace 51.3) and wholesalers of household goods (nace 51.4) were immediately allocated to consumption. These wholesale branches have a share of resp. 3.6% and 9.6% of total imports.

Imports of CN-consumption goods by other wholesale branches were not immediately allocated to consumption, since these branches are specialised in intermediate goods and capital goods. It is not excluded that a part of their imports goes to consumption but this is decided in the last phase, where all the yet unallocated imports and domestic production are destined. This phase is described in the next section.

Table 4 below gives the imports that were directly allocated to consumption both in basic prices (column [1]) and in purchaser prices (column [5]). When expressed in basic prices, they can be compared with imports, which is done in column [2]. In total 7.2% of imports was directly destined for consumption. When added to the 61.3% of imports already destined, this makes a total share of 68.5% directly allocated imports.

Table 4: The demand on the Belgian internal market and imports directly allocated to consumption

| |Imports |Share of |Total Use |Total Demand |Of which: |

| |directly |Imports |(pur-chaser |on the |Imports directly|

| |Allocated to |directly |prices) |Internal |allocated to |

| |Con-sumption |allocated to | |Market |Consump-tion |

| |(basic prices)|Con-sumption | |(purchaser |(purch. prices) |

| | | | |prices) | |

| |(Million euro)| |(Million | |(Million euro) |

| |[1] |% |euro) |(Million euro)|[5] |

| | | |[3] |[4] | |

| | |[2] | | | |

|Products of agriculture, hunting and forestry |385 |9.6 |13053 |9654 |571 |

|Fish and other fishing products |119 |56.2 |458 |354 |203 |

|Coal and lignite; peat; crude petroleum and natural gas; |0 | |3168 |1772 |0 |

|uranium and thorium | | | | | |

|Metal ores and other mining and quarrying products |2 |0.0 |7425 |5304 |2 |

|Food products, beverages and tobacco |2219 |25.1 |39415 |26943 |3235 |

|Textiles and textile products |1841 |33.0 |16670 |8276 |3186 |

|Leather and leather products |515 |52.4 |2152 |1516 |1096 |

|Wood and products of wood and cork |44 |4.1 |3570 |2236 |58 |

|Pulp, paper and paper products; recorded media; printing |223 |5.6 |14402 |9860 |293 |

|services | | | | | |

|Coke, refined petroleum products and nuclear fuel |0 |0.0 |13054 |9625 |0 |

|Chemicals, chemical products and man-made fibres |260 |1.6 |45320 |17522 |607 |

|Rubber and plastic products |98 |2.7 |9782 |4648 |130 |

|Other non metallic mineral products |40 |2.3 |8333 |5092 |67 |

|Basic metals and fabricated metal products |32 |0.3 |31160 |12275 |69 |

|Machinery and equipment n.e.c. |336 |4.6 |18528 |8734 |532 |

|Electrical and optical equipment |332 |3.3 |22436 |10317 |766 |

|Transport equipment |704 |4.2 |37157 |11557 |836 |

|Other manufactured goods n.e.c. |672 |12.9 |11263 |7457 |1123 |

|Electrical energy, gas, steam and hot water |0 |0 |8874 |8742 |0 |

|TOTAL |7823 |7.2 |306221 |161883 |12776 |

The share of imports that could be directly allocated to consumption is with respectively 56.2% and 52.4% the highest for fish and other fishing products and for leather and leather products. These are typical consumption goods that are less often produced in Belgium.

The table also allows one to compare imports directly destined for consumption with total use and with total demand on the internal market. For this purpose, these imports were also given in purchaser prices. Note the large difference between the amounts in column [1] and [5]. This is mostly due to the wholesale and retail trade margins on (imported) consumption, an issue which is discussed in part 3.

The comparison of the totals of columns [4] and [5] learns that the imports directly destined for consumption (valued in purchaser prices) form 7.9% of the demand on the internal market. The remaining part of the demand on the internal market, which amounts to 149.1 billion Euro (or 48.7% of total use of goods) forms the basis for destining the yet unallocated imports (See section 2.5.3).

It is interesting to note that in Belgium, with 161.9 compared to 306.2 billion Euro, the internal market for goods is only about half the size of the total goods market. A similar result arises if one compares the size of both markets in basic prices[23]. Recall that all traded imports, except those re-exported by merchants belong to the internal market. For a given good, the complement of the share of the internal market summarises the extent to which production is internationalised.

3 The destination of the remaining imports

Of the total import value of goods of 108.7 billion Euro, an amount of 34.3 billion Euro has not been allocated yet. These imports were proportionally distributed over the 48.7% of the goods part of the use table that was not linked yet with imports or production (the latter in the case of direct exports). This was done at the level of the 231 SUT-goods and 135 SUT-branches.

As always, we took account of the valuation differences, which implied the attribution of trade and transport margins and taxes and subsidies to these imports.

6 The resulting use table of imported goods

The application of the methodology described in the previous sections resulted in two use tables of imported goods. One valued in basic prices and one in purchaser prices.

Table 5 is a synthesis of the use table of imported goods valued in purchaser prices expressed as a percent of the use table of goods. Columns [2] to [6] in Table 5 show the shares of intermediate consumption, consumption, investments, inventory increases and exports that are imported. In total 51% of intermediate use, 39.3% of consumption, 54.4% of investments and 31.1% of exports of goods are imported.

It should not surprise that inventory increases stemming from imports are more than 7 times larger than total inventory increases. This is so because imports can only lead to inventory increases, while the total net stock changes are sometimes negative and close to zero. Likewise, the negative figures in column [5] for some goods, are all due to a (usually small) total inventory decrease.

Table 5: The Use table of Imports in purchaser prices as a share of total Use

| |Inter- | Inter- |Consumption |Invest-men|Inven-tory |Ex-ports |Total Use |

| |Mediary |Mediary | |t |changes | | |

| |consu-mption|consu-mption| | | | | |

| | | | | | | | |

| |PROP DISTR | | | | | | |

| |(%) |(%) |(%) | |(%) |(%) |(%) |

| |[1] |[2] |[3] |(%) |[5] |[6] |[7] |

| | | | |[4] | | | |

|Products of agriculture, hunting and forestry |33.1 |32.7 |34.1 |52.5 |115.9 |50.7 |36.5 |

|Fish and other fishing products |53.3 |56.3 |75.5 | |166.6 |53.8 |68.1 |

|Coal and lignite; peat; crude petroleum and natural |99.4 |99.2 |53.6 | |3423.9 |98.0 |99.3 |

|gas; uranium and thorium | | | | | | | |

|Metal ores and other mining and quarrying products |66.0 |67.9 |98.4 | |1050.2 |87.3 |81.3 |

|Food products, beverages and tobacco |24.9 |29.9 |26.4 | |152.6 |22.1 |26.8 |

|Textiles and textile products |36.5 |51.9 |66.7 | |-427.4 |20.9 |44.9 |

|Leather and leather products |61.4 |68.3 |92.4 | |731.7 |46.8 |78.8 |

|Wood and products of wood and cork |33.3 |34.1 |58.8 | |-175.6 |24.4 |33.4 |

|Pulp, paper and paper products; recorded media; |25.6 |28.6 |23.8 | |120.9 |39.1 |31.2 |

|printing services | | | | | | | |

|Coke, refined petroleum products and nuclear fuel |31.8 |30.1 |7.2 |15.0 |324.2 |37.7 |27.1 |

|Chemicals, chemical products and man-made fibres |43.8 |60.1 |25.2 | |217.4 |27.4 |41.7 |

|Rubber and plastic products |44.6 |54.4 |50.3 | |2099.7 |19.0 |42.1 |

|Other non metallic mineral products |21.1 |23.0 |32.4 | |-8359.3 |18.9 |24.1 |

|Basic metals and fabricated metal products |36.1 |51.9 |50.9 |21.3 |-282.4 |12.3 |35.2 |

|Machinery and equipment n.e.c. |44.5 |57.3 |63.3 |52.8 |579.1 |32.8 |46.5 |

|Electrical and optical equipment |54.5 |63.0 |63.2 |71.8 |-200.6 |45.2 |59.3 |

|Transport equipment |73.8 |86.7 |49.8 |53.9 |429.7 |25.8 |48.3 |

|Other manufactured goods n.e.c. |44.9 |44.7 |52.4 |25.9 |824.9 |62.8 |54.6 |

|Electrical energy, gas, steam and hot water |10.7 |10.8 |11.7 | |-47.0 |12.3 |11.2 |

| | | | | | | | |

|TOTAL |42.3 |51.0 |39.3 |54.5 |757.3 |31.1 |42.5 |

|TOTAL in case of a proportional allocation at the | |42.3 |41.5 |50.0 |74.6 |41.7 |42.5 |

|SUT-product &industry level | | | | | | | |

1 Imports are expressed in basic prices

Table 5 allows a comparison of our computed use table of imports with the results obtained if all imports are spread proportionally over the use table. If the only product detail one disposes of is the one given here, the import percentage of all cells in the use table would equal that of total use given in column [7]. It is apparent from the table that the import shares usually differ seriously from those in the last column.

A more interesting comparison is that with a proportional allocation of imports at the level of the 231 SUT-goods and 135 SUT-branches[24]. This is in fact the approach many statistical offices will fall back on if they decide not to make use of trade data similar to ours. The percentages given in column [1] give the share of imports in intermediate use in the case of a proportional distribution. Those in the last row give the totals for each use in the case of a proportional allocation.

The comparison of column [1] and [2] reveals that, while the proportional allocation of imports does well for some goods (where the percentages in column [1] and [2] are close), it generally underestimates the import share in intermediate consumption. With 42.3%, the total import share in intermediate consumption of the proportional distribution is smaller than the 51 % we obtained. The proportional allocation clearly underestimates the import share in intermediate consumption of chemical products, basic metals, machinery equipment, transport equipment, etc.

A part of this underestimation of the import share of intermediate consumption at the SUT-product/industry level is due to errors in the use table itself (as explained in section 2.4). Still, this only illustrates the limits of the benefits that can be obtained from working at a further product detail while maintaining a proportional allocation of imports.

The proportional allocation seems less harmful for determining the part of consumption that is imported. Our approach yields a share of imports in consumption of 39.3%, a proportional allocation leads to one of 41.5%. On the contrary, for exports, there is a significant difference. In the proportional distribution, 41.7% of exports results from imports. In our computations this share is limited to 31.1%.

One might still be surprised by the huge share of exported goods that origin (without transformation) from imports. This is due to the fact that the import and export figures in our SUT table include large flows connected to merchanting as well as other forms of re-exports. Neglecting this, and simply putting the import share in exports to zero would lead to much larger errors in the use table of imports[25].

The destination of trade margins

In this part we describe our methodology for reallocating trade margins, separating trade margins on imports and distinguishing wholesale from retail trade margins and then present the results.

1 Methodology for reallocating trade margins

A trade margin is defined in the European System of Accounts of 1995 as:

“…the difference between the actual or imputed price realised on a good purchased for resale and the price that would have to be paid by the distributor to replace the good at the time it is sold or otherwise disposed of.”

Thus trade margins are only defined in the case of goods.[26] There are trade margins on domestic production and imports. The only condition is that the goods must have been bought at least once with the purpose of resale. The distributor can belong to a trade branch or not. In the latter case they are called secondary trade margins.

The construction of the use table of trade margins is one of the necessary steps to transform a use and supply table into an input-output table[27].

Typically, a supply table is only valued in basic prices, while a use table is only valued in purchaser prices. In the SUT-framework it is sufficient to have the totals for trade and transport margins and taxes and subsidies for each product. When these are added to total supply it is converted into purchaser prices and thus comparable to total use. In addition, the supply table has some rows that indicate where trade (and transport) margins are produced.

For compiling an Input-Output table one has to be able to compare each cell of the use table with each cell of the supply table. This implies that both are valued in the same prices. To convert the use table in basic prices one needs a table that reallocates trade margins to the uses of the products to which they pertain[28]. In other words, we have to explicit which part of the cost born by an intermediate or final user is a trade margin.

This reallocation of trade margins is not an easy task. The Eurostat Input-output Manual proposes to start by determining the share of purchases served by trade in each cell of the use table. The manual does not point out how this can be done. In stead it finds it unlikely that reliable information can be obtained by surveying users of goods. This is because these are often unaware of the distributive channels their goods have followed and traders will usually not reveal their margins to them.

We cannot propose a solution that accounts for all differences in trade margin rates between distributive channels, but our approach does allow to identify large parts of intermediate consumption, investment and exports where no trade margins exist. In table 2 it was shown that 34.4% of the imported goods was directly used for intermediate consumption by the importing industry. If valued in purchaser prices[29], this corresponds to 30.5 % of total intermediate consumption of goods. Likewise 3% of imports are directly used for investment by the importing industry. This corresponds to 20.8% of total investments in goods.

It can be argued that there could be trade margins on goods imported by the industry that uses them, since firms may resale imported raw materials or capital goods to competitors. An example of this may be the joint purchase of goods aimed at obtaining quantity price cuts. However, in such cases of cooperation, trade margins are typically very low. They only serve to compensate for eventual costs of prepayment or storage.

Even more impressive than that for intermediate consumption or investment is the share of exports that is excluded from trade margins. In table 3 we showed that 47.3% of production was directly exported by the producer. No trade margins are expected on these direct exports, which amount to 61% of the total export value of goods.

Thus, in a first step we determined important parts of the use table without trade margins. The next steps, although useful for this purpose, go further than determining the use table of trade margins. This is why they are discussed separately.

2 Determining the trade margins on imported goods

All imports that are not directly linked with intermediate consumption and investment or special forms of re-export are traded goods, which implies that there are trade margins on them. Except for imports destined for exports in the case of merchanting, all these goods are at least once traded on the Belgian internal market.

We assumed that there were no trade margins on re-exported imports in the case of special transactions and imports destined for exports in the case of disinvestments. Trade margins on merchanting were determined as explained in section 2.3.2[30].

In a second step the total of each non-trade branch trade margins (known from a row in the supply table) was allocated partly over its imports destined for resale. In other words, we determined the share of secondary trade margins realised on imports. Which imports were destined for resale is explained in section 2.4. The trade margin rate applied to these imports destined for resale is the quotient of the branch secondary trade margins over its total trade turnover.

The trade margins on imports used for exports in the context of merchanting make part both of the use and the supply table of trade margins. Those on the other imports of traded goods only make part of the latter. They are useful though to help separate trade margins on imported goods from those on other goods.

3 Separating wholesale and retail trade margins

The Eurostat Input-Output Manual (draft 2001, p 107) describes wholesale and retailing as follows:

“Wholesale is the re-sale (sale without transformation) of new and used goods to retailers, industrial commercial and institutional or professional users; or to other wholesalers. Retailing is the re-sale of new and used goods, mainly to the general public for personal or household consumption or utilisation“

We will apply this definition strictly when separating wholesale from retail trade margins. This means that wholesalers realise retail trade margins when they sell to households for consumption, and retailers realise wholesale trade margins when they sell to firms or other professional users.

It also implies that retail trade margins are inseparable from household consumption or utilisation. In the Belgian 1995 supply and use table, the only investments households can make are in the building and construction of houses. There are no trade margins on construction services. This implies that no retail trade margins exist without consumption by households. This forms the basis of equation (2) that expresses the relation between the wholesale trade margins rate (whmr) and the retail trade margins rate (retmr) for each SUT-product x:

(2)

In equation (2) IMM is the sum of the trade margins realised on the internal market. It equals all trade margins minus the trade margins allocated to exports in the context of merchanting. CONS is total household consumption and RESTIMD is the other demand on the internal market. RESTIMD equals the parts of intermediate consumption, investments, inventory changes and exports that have not directly been allocated to imports or exports. CONS and RESTIMD are valued in purchaser prices.

The equation says that on the other demand on the internal market (RESTIMD) there are only wholesale trade margins. On consumption there are always retail trade margins and for a fraction given by z also wholesale trade margins.

A consumer good only takes wholesale trade margins if retailers have not directly imported it or bought it from domestic producers. Therefore z is approximated by

(1-0.475)(1-a), with a the import–share of retailers and 0.475 the general share of supermarkets in the sales of consumer goods[31].

Except for IMM we no longer work with trade margins as such, but with wholesale and retail trade margin rates. These are the quotient of the wholesale or retail trade margins over the wholesale or retail turnover. It is more easily to collect information and form an intuition on trade margin rates than on the trade margins themselves. With z, RESTIMD, CONS and IMM known, equation (2) still has two unknowns: the rates retmr and whmr. As an additional condition we therefore impose that:

Retmrx= gx whmrx (3)

The factor g is the ratio of the retail and wholesale trade margins rate. We know that this factor is usually larger than one, since the retail trade margins rate tends to be higher than the wholesale trade margin rate. For some goods, like food and tobacco, textiles, clothing, footware, gasoline and gasoil we gathered specific information about this trade margin rate ratio. In general g was fixed at 2.

Now it is possible to solve equation (2) by rewriting it as:

(4)

The positive root of this quadratic expression gives the retail trade margin rate. By multiplying this with CONS, we know the retail trade margins. The difference between those and IMM are the wholesale trade margins.

In the use table of trade margins, all obtained retail trade margins are allocated to consumption, while wholesale trade margins on consumption are separated from the other destinations.

4 The use-side table of trade margins

Table 6 below gives the trade margins as a percentage of intermediate consumption, consumption, investment, inventory increases, exports and total use. The trade margins given here are consistent with the use table of imports calculated by the same (SAS) program. There are no cells where trade margins are bigger than the use minus the use of imports valued in basic prices. In total, trade margins represent 12.6% of the total use of goods. However, the share of trade margins is as high as 33.6% for consumption, while it is only 6.1% for exports and 9.8% for intermediate consumption.

Table 6: Trade margins as a percentage of different uses

| |Inter- |Con-sumpti|Of which: |Of which: |Investment|Inven-tory|Ex-ports |Total |

| |Med-iary |on |Whole-sale|Retail | |chan-ges | |Use |

| |con-sum-pt| |mar-gins |mar-gins | | | | |

| |ion | |(%) | | | | | |

| |(%) | |[3] |(%) | |(%) | | |

| |[1] |(%) | |[4] | |[6] |(%) | |

| | |[2] | | |(%) | |[7] |(%) |

| | | | | |[5] | | |[8] |

|Products of agriculture, hunting and forestry |9.3 |34.5 |6.6 |27.9 |4.5 |18.4 |11.9 |14.1 |

|Fish and other fishing products |8.4 |41.1 |6.1 |35.0 |- |19.8 |10.6 |28.5 |

|Coal and lignite; peat; crude petroleum and natural |4.4 |36.2 |8.0 |28.2 |- |102.0 |6.8 |5.1 |

|gas; uranium and thorium | | | | | | | | |

|Metal ores and other mining and quarrying products |10.2 |0.3 |0.1 |0.3 |- |123.1 |0.8 |4.2 |

|Food products, beverages and tobacco |7.6 |27.7 |3.8 |23.8 |- |12.2 |4.8 |15 |

|Textiles and textile products |6.8 |40.6 |4.5 |36.1 |- |-6.1 |4.6 |16.3 |

|Leather and leather products |12.9 |47.7 |4.2 |43.6 |- |25.6 |13.3 |32.7 |

|Wood and products of wood and cork |8.8 |23.3 |4.1 |19.1 |- |-0.5 |3.9 |8 |

|Pulp, paper and paper products; recorded media; |5.4 |19.4 |3.7 |15.7 |- |13.7 |9.4 |8.4 |

|printing services | | | | | | | | |

|Coke, refined petroleum products and nuclear fuel |13.7 |17.4 |6.1 |11.3 |35.7 |74.4 |8.1 |13.4 |

|Chemicals, chemical products and man-made fibres |14.9 |63.5 |10.8 |52.7 |- |41.1 |10.0 |16.7 |

|Rubber and plastic products |10.1 |40.9 |6.3 |34.6 |- |98.2 |4.2 |8.8 |

|Other non metallic mineral products |9.7 |36.2 |6.1 |30.2 |- |-402.0 |5.5 |9.8 |

|Basic metals and fabricated metal products |6.4 |32.6 |3.4 |29.2 |8.7 |-23.8 |2.2 |5.1 |

|Machinery and equipment n.e.c. |17.2 |42.3 |6.6 |35.7 |18.5 |101.5 |7.1 |15.0 |

|Electrical and optical equipment |15.0 |57.1 |17.7 |39.4 |26.1 |29.0 |10.5 |19.2 |

|Transport equipment |6.1 |20.4 |7.9 |12.5 |12.5 |31.6 |2.9 |7.1 |

|Other manufactured goods n.e.c. |11.5 |40.2 |6.8 |33.4 |15.0 |28.3 |7.2 |16.6 |

|Electrical energy, gas, steam and hot water |0 |0 |0 |0 |0 |0 |0 |0 |

| | | | | | | | | |

|TOTAL |9.8 |33.6 |6.1 |27.5 |18.2 |83.3 |6.1 |12.6 |

|Total in the case of a proportional allocation at the|10.7 |19.0 | | |15.1 |24.5 |11.5 |12.6 |

|SUT-product & industry level | | | | | | | | |

This reflects the large parts of exports and intermediate consumption that have been excluded from trade margins. In this respect, the 18.2% of trade margins on investment is surprisingly high. This is partly a consequence of the fact that the fraction of exports and intermediate consumption that was excluded from trade margins (respectively 61% and 30.5%) was higher than that on investments (20.8%).

A second reason for this is that trade margins tend to be higher on investment goods. This can be deducted from the last row of the table, which gives the trade margins share in the case of a proportional allocation at the SUT-product and industry level. This proportional allocation puts a relatively higher share of trade margins on consumption and investments than on other uses. This reflects the fact that trade margins are generally higher on products that are mainly used for these purposes. However, the proportional distribution still seriously underestimates trade margins on consumption, inventory increases and investment, and overestimates their share in intermediate consumption and exports when compared to our results.

Columns [3] and [4] of table 6 show how trade margins on consumption are divided between wholesale and retail margins. The higher trade margins rate on retail trade and the assumption that wholesale margins were not present in a fraction z of consumption expenses, led to a dominance of retail trade margins in total trade margins on consumption.

The total amount of retail trade margins was estimated at 12.7 billion Euro. As the total amount of trade margins realised by retail trade branches was estimated by the BNB at 16.8 billion Euro, this may still be an underestimation of retail trade margins. It implies that retailers realise a large fraction of their sales and margins by selling to other firms and professionals.

Conclusions

We demonstrated that both for compiling the use table of imported goods as the use side trade margins table, detailed import and export data with combined information on the traded products and the trading branches are extremely useful. The data used should exist in all EU member states, since they are the basis of export and import flows of goods published for all EU-countries by Eurostat.

The information of such a database on exports is just as vital as that on imports, both for the use table of imports as for the reallocation of trade margins. First, the comparison of production with exports at an industry level allows to determine the fraction of production that is directly exported by the producing industry. These direct exports include no trade margins and can obviously not be the destination of imports.

The second reason is that only the comparison of imports and exports at a very detailed product and industry level allows to isolate imports destined for exports in the case of merchanting or other forms of re-exports. We do not see how merchanting, that is imports destined to be re-sold abroad by Belgian traders, could be separated from other imports and exports without making extensive use of international trade data at a detailed product and industry level.

No less than 61 % of the Belgian export value in 1995 was found to be direct exports of own production. Likewise as much as 19% of the import value of goods was directly destined for exports in the case of merchanting.

Detailed import data are also useful because they can be compared with the intermediate consumption and investment of each SUT-branch and because they allow to isolate goods that must be mainly destined for consumption.

Combining these possibilities, we were able to allocate 68.5% of the import value of goods directly to their place in the use table.

Besides showing the usefulness of international trade data, this paper also shows the benefits that can be made by integrating the compilation of the use table of imported goods and the use side table of trade margins. We computed a use table of imports and a use side trade margins table that are fully consistent with each other without the need of any ad hoc adjustments afterwards.

The resulting use tables of imports and trade margins are far different from those that could be obtained if imports and margins were allocated proportionally to uses. This holds even when comparing with a proportional allocation at a detailed product level.

Finally a distinction was made between demand and supply on the (Belgian) internal market, restricted to deals between Belgian residents, and the total demand and supply. The concept of the internal market was useful for our purposes because it is the part of demand and supply where trade margins are concentrated and imports cannot be allocated by just looking at the industry of the importer.

The size of the internal market is also an inverse indicator of the extent to which the production and use of a good is internationalised. The concept of the internal market, along with that of the direct exports by producers, might therefore also be of more analytical interest.

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Instituut voor de nationale rekeningen (2001) “Handleiding intrastat”, dienst Statistiek buitenlandse handel, Nationale Bank van België, Brussel., p 81.

Simcha Bar-Eliezer (1989) “compilation of import matrices”, Israel

Delphine Rase (2000), “Les marges de gros et de détail sur le carburant”, note DS no 1430, Bureau Fédéral du Plan, Bruxelles, p17.

Delphine Rase (2000), “Les marges commerciales dans le tableau entrées-sorties 1995”, note DS no 1431, Bureau Fédéral du Plan, Bruxelles, p31.

UN (1999), Handbook of input-output table compilation and analysis, Studies in methods, series F, No 74, New york.

Bart Van den Cruyce (2002) “De bestemming van de handelsmargs”, nota SD, nr 1570, Federaal Planbureau, p 11.

Bart Van den Cruyce (2002) “De bestemming van de invoer van goederen en invoerrechten”, nota SD, nr 1572, Federaal Planbureau, p 23.

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[1] The author is a member of the Input Output team at the Belgian Federal Planning Bureau. We thank all team members for their useful comments on the notes and calculations preceeding this paper.

[2] All CPA products from 01.11.10 (cereals) to 41.00.20 (drinking water) are considered as goods here.

[3] European System of Accounts 1995, ESA 1995, par 3.60

[4] Notable exceptions are electricity, gas and water, (CPA 40 and 41) where distribution activities are regarded as production and trade margins are zero.

[5] The supply and use table of 1995 was compiled by the Belgian National Bank

[6] According to the Eurostat Input-Output manual, draft, July 2001.

[7] Known by its nace-bel code, which is the 4 digits nace code plus a one digit Belgian extension.

[8] Like in Israel: Simcha Bar-Eliezer (1989) “compilation of import matrices”

[9] Eurostat, Eurostat Input-Output, Draft, Luxembourg, July 2001

[10] Which the Federal Planning Bureau disaggregated such that it comprises 231 goods.

[11] A detailed description of the information firms have to supply can be found in the documents of the Instituut voor de Nationale Rekeningen “Handleiding intrastat” and “Toelichting extrastat”

[12] For an overview of the types of transactions, see the documents “Toelichting extrastat” and “handleiding intrastat” of the Instituut voor de nationale rekeningen.

[13] In fact this may be a reason for trade margins in Belgium to be higher than those in other countries.

[14] Since imported fixed assets can also be destined for intermediate consumption. An example is the operational lease of airplanes and trains in Belgium. Even in this case, disinvestments may be important. A sale and lease back operation might lead to a similar situation.

[15] Because there are no excise taxes and registration rights on exports, the denominator excludes exports for these taxes, thus increasing the shares of other uses. Import duties are only attributed in the case of an extrastat import.

[16] Indeed, the compilation of the use table was done without making use of the detailed trade data we dispose of here.

[17] These include agriculture, mining, manufacturing, energy and water. The rest of the 135 branches belong to construction, trade and services.

[18] These errors occur because those products are not mentioned in the survey that details purchases, or because firms that use them are not sampled.

[19] We also assume that the use of wooden containers is overestimated due to an equilibration process that departs from using correct totals for intermediate consumption by branch.

[20] Since we do not dispose of a table of self produced investments by branch and product, we do not treat this issue further on the paper and set the corresponding values to zero.

[21] A counterexample is crude petroleum, which is only used for intermediate consumption.

[22] One might add the import share of wholesalers that specialise in consumption goods to determine whether imported goods are consumption goods.

[23] Valued in basic prices, the supply and demand on the internal market for goods equals 122.1 billion Euro, which is 46.9% of total demand and supply of 260.5 billion Euro. Thus in basic prices the market restricted to transactions between Belgians is even less than half the size of the total market.

[24] In this proportional allocation, imports (expressed in basic prices) are allocated over use according to the weight of these uses in the use table (expressed in purchaser prices). For converting the optained uses of imports into purchaser prices, we added the total of trade & transport margins and taxes on imports obtained in our non proportional compilation. This way we exclude differences between columns [1] and [2] that are due to a difference in valuation.

[25] If required, the data that result from our approach allow to withdraw imports destined for exports from the import and export figures in the supply and use tables.

[26] Limiting cases are the distribution of electricity, gas and water. The distribution margins realised on these products are not considered as trade margins, but as normal production.

[27] See paragraph 9.34 and 9.38 of the European System of Accounts.

[28] A similar table is necessary for transport margins and taxes and subsidies.

[29] Trade margins are of course zero here, but there can be transport margins and some taxes and subsidies. These are allocated proportionally.

[30] This was done before other trade margins were allocated, so that it is still possible to remove imports and exports related to merchanting as well as the trade margins on them from the SUT table.

[31] This share is taken as a proxy for the part of the distribution that omits wholesalers.

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